DEPARTMENT OF TREASURY
Office of the Comptroller of the Currency
12 CFR Parts 6
Docket ID OCC-2013-0008
RIN 1557-AD69 FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 217
Regulation H and Q
Docket No. R-1460
RIN 7100-AD 99 FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 324
RIN 3064-AE01 Regulatory Capital Rules: Regulatory Capital, Enhanced Supplementary Leverage Ratio
Standards for Certain Bank Holding Companies and their Subsidiary Insured Depository
AGENCIES: Office of the Comptroller of the Currency, Treasury; the Board of Governors of
the Federal Reserve System; and the Federal Deposit Insurance Corporation.
ACTION: Final rule.
SUMMARY: The Office of the Comptroller of the Currency (OCC), the Board of Governors of
the Federal Reserve System (Board), and the Federal Deposit Insurance Corporation (FDIC)
(collectively, the agencies) are adopting a final rule that strengthens the agencies supplementary
leverage ratio standards for large, interconnected U.S. banking organizations (the final rule).
The final rule applies to any U.S. top-tier bank holding company (BHC) with more than $700
billion in total consolidated assets or more than $10 trillion in assets under custody (covered
BHC) and any insured depository institution (IDI) subsidiary of these BHCs (together, covered
organizations). In the revised regulatory capital rule adopted by the agencies in July 2013 (2013
revised capital rule), the agencies established a minimum supplementary leverage ratio of
3 percent, consistent with the minimum leverage ratio adopted by the Basel Committee on
Banking Supervision (BCBS), for banking organizations subject to the agencies advanced
approaches risk-based capital rules. The final rule establishes enhanced supplementary leverage
ratio standards for covered BHCs and their subsidiary IDIs. Under the final rule, an IDI that is a
subsidiary of a covered BHC must maintain a supplementary leverage ratio of at least 6 percent
to be well capitalized under the agencies prompt corrective action (PCA) framework. The
Board also is adopting in the final rule a supplementary leverage ratio buffer (leverage buffer)
for covered BHCs of 2 percent above the minimum supplementary leverage ratio requirement of
3 percent. The leverage buffer functions like the capital conservation buffer for the risk-based
capital ratios in the 2013 revised capital rule. A covered BHC that maintains a leverage buffer of
tier 1 capital in an amount greater than 2 percent of its total leverage exposure is not subject to
limitations on distributions and discretionary bonus payments under the final rule.
Elsewhere in todays Federal Register, the agencies are proposing changes to the 2013
revised capital rules supplementary leverage ratio, including changes to the definition of total
leverage exposure, which would apply to all advanced approaches banking organizations and
thus, if adopted, would affect banking organizations subject to this final rule.
EFFECTIVE DATE: The final rule is effective January 1, 2018.
FOR FURTHER INFORMATION CONTACT:
OCC: Roger Tufts, Senior Economic Advisor, (202) 649-6981; Nicole Billick, Risk Expert,
(202) 649-7932, Capital Policy; or Carl Kaminski, Counsel; or Henry Barkhausen, Attorney,
Legislative and Regulatory Activities Division, (202) 649-5490, Office of the Comptroller of the
Currency, 400 7th Street S.W., Washington, DC 20219.
Board: Constance M. Horsley, Assistant Director, (202) 452-5239; Juan C. Climent, Senior
Supervisory Financial Analyst, (202) 872-7526; or Sviatlana Phelan, Senior Financial Analyst,
(202) 912-4306, Capital and Regulatory Policy, Division of Banking Supervision and
Regulation; or Benjamin McDonough, Senior Counsel, (202) 452-2036; April C. Snyder, Senior
Counsel, (202) 452-3099;or Mark C. Buresh, Attorney, (202) 452-5270, Legal Division, Board
of Governors of the Federal Reserve System, 20th and C Streets, N.W., Washington, DC 20551.
For the hearing impaired only, Telecommunication Device for the Deaf (TDD), (202) 263-4869.
FDIC: George French, Deputy Director, [email protected]; Bobby R. Bean, Associate Director,
[email protected]; Ryan Billingsley, Chief, Capital Policy Section, [email protected]; Karl
Reitz, Chief, Capital Markets Strategies Section, [email protected]; Capital Markets Branch,
Division of Risk Management Supervision, [email protected] or (202) 898-6888; or
Mark Handzlik, Counsel, [email protected]; Michael Phillips, Counsel, [email protected];
Rachel Ackmann, Senior Attorney, [email protected]; Supervision Branch, Legal Division,
Federal Deposit Insurance Corporation, 550 17th Street, N.W., Washington, DC 20429.
On August 20, 2013, the agencies published in the Federal Register, for public comment,
a joint notice of proposed rulemaking (the 2013 NPR) to strengthen the agencies supplementary
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]
leverage ratio standards for large, interconnected U.S. banking organizations.1 As noted in the
2013 NPR, the recent financial crisis showed that some financial companies had grown so large,
leveraged, and interconnected that their failure could pose a threat to overall financial stability.
The sudden collapses or near-collapses of major financial companies were among the most
destabilizing events of the crisis. As a result of the imprudent risk taking of major financial
companies and the severe consequences to the financial system and the economy associated with
the disorderly failure of these companies, the U.S. government (and many foreign governments
in their home countries) intervened on an unprecedented scale to reduce the impact of, or
prevent, the failure of these companies and the attendant consequences for the broader financial
A perception persists in the markets that some companies remain too big to fail, posing
an ongoing threat to the financial system. First, the perception that certain companies are too
big to fail reduces the incentives of shareholders, creditors and counterparties of these
companies to discipline excessive risk-taking by the companies. Second, it produces competitive
distortions because those companies can often fund themselves at a lower cost than other
companies. This distortion is unfair to smaller companies, damaging to fair competition, and
may artificially encourage further consolidation and concentration in the financial system.
An important objective of the Dodd-Frank Wall Street Reform and Consumer Protection
Act of 2010 (Dodd-Frank Act) is to mitigate the threat to financial stability posed by
systemically-important financial companies.2 The agencies have sought to address this concern
through enhanced supervisory programs, including heightened supervisory expectations for
1 78 FR 51101 (August 20, 2013). 2 See, e.g., Pub. L. 111-203, 124 Stat. 1376, 1394, 1571, 1803 (2010).
large, complex institutions and stress testing requirements. In addition, the Dodd-Frank Act
mandates the implementation of a multi-pronged approach to address this concern: a new orderly
liquidation authority for financial companies (other than banks and insurance companies); the
establishment of the Financial Stability Oversight Council, empowered with the authority to
designate nonbank financial companies for Board supervision (designated nonbank financial
companies); stronger regulation of large BHCs and designated nonbank financial companies
through enhanced prudential standards; and enhanced regulation of over-the-counter (OTC)
derivatives, other core financial markets and financial market utilities.
This final rule builds on these efforts by adopting enhanced supplementary leverage ratio
standards for the largest and most interconnected U.S. banking organizations. The agencies have
broad authority to set regulatory capital standards.3 As a general matter, the agencies authority
to set regulatory capital requirements and standards for the institutions they regulate derives from
the International Lending Supervision Act (ILSA)4 and the PCA provisions5 of the Federal
Deposit Insurance Act (FDIA). In enacting ILSA, Congress codified its intentions, providing
that it is the policy of the Congress to assure that the economic health and stability of the United
States and the other nations of the world shall not be adversely affected or threatened in the
future by imprudent lending practices or inadequate supervision.6 ILSA encourages the
agencies to work with their international counterparts to establish effective and consistent
3 The agencies have authority to establish capital requirements for depository institutions under the prompt corrective action provisions of the Federal Deposit Insurance Act (12 U.S.C. 1831o). In addition, the Federal Res